MNI Norges Bank Review: Mar26 - Hikes Likely to Be Appropriate

CLICK HERE FOR THE FULL REPORT 

EXECUTIVE SUMMARY: 

• Norges Bank held the policy rate at 4.00% as unanimously expected but took an unambiguously hawkish turn in its communications and updated rate path projections. Although the tail risk of a March hike did not materialise, the policy statement noted that: “The Committee’s current assessment of the inflation outlook implies that it will likely be appropriate to raise the policy rate at one of the forthcoming monetary policy meetings."
• The updated rate path was revised up by a maximum of 81bps (in Q2 2027). This was more aggressive than most analyst estimates we had seen. 
• Following the decision, a number of analysts have added hikes to their forecast profile, with differing views on whether May or June is more likely. Although Norges Bank usually move at quarterly MPR decisions, we think the foundations have clearly been laid for a move in May unless March inflation (due April 10) surprises to the downside. A de-escalation in the Iran war would also be a dovish development on net, but Norges Bank is still extremely worried about domestic inflationary pressures, so it may not be enough to delay a hike.